Various types of penalties in the event of default
The Income Tax Act, 1961 prescribes various types of penalties in the event of defaults under the Act. These are :
1:- For failure to pay tax [ Penalties in the event of Default ] [ Sec. 221(1)]:
When an assesses is in default in making a payment of tax, he shall be liable to pay penalty as the Assessing Officer may direct, and in the case of a continuing default, such further amount as the Assessing Officer may direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears.
2:- Penalty For Concealment Of Income [ Section 271(1)(B) Or (C) ]
(A) Penalty is levied in following situations
Where the income has been concealed. Concealed income is that income which has not been shown in the return of income. During the course of assessment assesses discovers concealed income. It can be calculated as Concealed In come = Assessed Income – Income shown in the return of income
Inaccurate particulars of the income has been furnished . it is the duty of taxpayer not only to furnish the return of income but also to furnish the correct return. He is committing an offence for furnishing an inaccurate particulars. It is held by Courts that the person may have disclosed his correct income ( i.e not concealed any income) but he may still be liable if inaccurate particulars of income is furnished.
Fails to furnish his return of Income
(B) Amount of penalty levied
Minimum Penalty = 100% of the amount of tax sought to be evaded.
Maximum Penalty = 300% of the amount of tax sought to be evaded.
Penalty is in addition to any tax payable by him.
3:- Registered Firm [ Penalties in the event of Default ] [ Sec 271(2)]
When the person liable to penalty is a registered firm or an unregistered firm which has been assessed u/s 183(b) , then the penalty imposable u/s 271(1) shall be the same amount as would be impossible on that firm if that firm were an unregistered firm.
4:- For Wrong Distribution Of Profit By Registered Firm [ Penalties in the event of Default ] [ Sec. 271(4)]
IF the profits of the registered firm are distributed in such a way that the share of partner is shown below the real amount and if such a partner returns his income below the real amount, he shall in addition to tax, if any payable by him, be liable to pay a penalty of 150% of the difference between tax on partner’s income assessed and tax on income as returned. In such a case no refund or other adjustment shall be claimable by any other partner by reason of such direction.
5:- Penalty for failure to comply with the provisions of section 133B [ Penalties in the event of Default ][ Sec. 272AA]
If a person fails to comply with the provisions of section 133B regarding entry of Income Tax Authorities in any building etc. The penalty for non compliance may extend to Rs.1000.
Such Penalty can be levied only after the person has been given an opportunity of being hear.
6:- Penalty for failure to comply with the provisions of Section 139A. [ Sec. 272B]
(1) If a person fails to comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs.10,000.
(2) In case assessee quotes a false or incorrect permanent account number on nay document an which he knows that it is false or incorrect, the Assessing Officer may direct him to pay a penalty of Rs.10,000 . Such Penalty can be levied only after the person has been given an opportunity of being hear.
7:- Penalty for failure to comply with the provisions of section 206 CA i.e. Tax Collection Account Number [ Sec. 272 BBB]
If a person fails to comply with the provisions of section 206CA i.e. to collect Tax Collection Account Number, he shall, on an order passed by the Assessing Officer, pay, by way of penalty, a sum of Rs.10,00.
Such Penalty can be levied only after the person has been given an opportunity of being hear.
